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Working together for friction-free shopping

By Peter Bayley, Executive Director, Ecosystem Risk • Visa Europe

November 05, 2015

There is one dilemma that online retailers the world over share in common: the constant battle between convenience and security.

As any conversion rate optimisation consultant will tell you, there tends to be a direct correlation between the convenience of your online checkout processes and your conversion rates. The impact can be significant. Case studies show that, just by re-designing your payment page, you can enjoy a 10% or even 20% uplift in sales. But there can also be a commensurate cost, because a quicker, slicker online checkout process may inadvertently open the door to a lot more fraud.

But there are still some easy things that retailers of all sizes can do today to minimize their risk without increasing friction:

1. Understand that charge-backs do not equal fraud

To manage fraud rates effectively, merchants need a way to measure them accurately. For a quicker, fuller view, Visa TC40s provide a near-real time view of every transaction that is ever reported to Visa as fraud – irrespective of whether it is subsequently charged-back. By scrutinising TC40s, retailers get a better understanding of which transactions from which issuers in which markets are fraudulent. They can track their performance over time and discover if any enhancements to payment pages are having unintended consequences.

2. Re-think authentication

Most UK-based Visa card issuers now use risk-based authentication such as Verified by Visa. So, instead of demanding active verification, such as a password, for all online transactions, issuers run some instantaneous background checks – and allow the vast majority of transactions (typically around 95% of them) to proceed without verification.

Many merchants are taking a similar approach, only feeding a transaction to Verified by Visa when it looks suspicious, or when they want some added liability protection.

3. Be cautious with card on file (because it’s not all good, and it’s not all bad)

In a bid to remove friction, more and more retailers are advocating card-on-file and wallet-type solutions – which eliminate the need for customers to key in card details for every purchase.

Retailers should always authenticate the first transaction or initial set-up. Then monitor subsequent transactions for sudden or uncharacteristic burst of spending, a change in device, or, generally, anything ever looks in any way odd. If any of those events happen, re-authenticate them.

4. Work with Visa and your issuer to come down on first party fraud

Sometimes, a customer buys with no intention of actually paying. Or maybe they did, but have a case of buyer’s remorse. Either way, they dispute the transaction with their issuer. The retailer loses the goods, the money and they become liable for a handling fee.

Now, it’s easier for merchants to contest these chargebacks. Just submit any compelling evidence (like device checks or proof of delivery) to show that a bona-fide customer knowingly bought and received a genuine product or service – and the issuer will be obliged to take this into account.

Ultimately, we believe it will become possible to eliminate all of the friction from every transaction. One day in the not-too-distant future, it will be possible to authenticate a customer, not through a password or even a biometric, but because they are the only person who would have bought that item, at that time, from that location, across that channel using that device. Using that kind of intelligent authentication, we will have created the ultimate friction-free shopping experience.

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